question archive Evaluate each of the following questions independently: [A] Referring to Garrett and Schulzke’s sample size table (Appendix A), determine an appropriate sample size for the test of the control relating to authorization of credit memos

Evaluate each of the following questions independently: [A] Referring to Garrett and Schulzke’s sample size table (Appendix A), determine an appropriate sample size for the test of the control relating to authorization of credit memos

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Evaluate each of the following questions independently:

[A] Referring to Garrett and Schulzke’s sample size table (Appendix A), determine an appropriate sample size for the test of the control relating to authorization of credit memos.

[B] Regardless of your answer to question [A], assume that Darrell randomly selected a sample of 75 credit memo packages, each of which contains a credit memo with a matching receiving report and inventory warehouse receipt, and has reviewed all but the last five credit memo packages and found no exceptions. Each credit memo authorizing a customer refund or reduction in the amount owed due to the return of goods should be authorized by Brian Thompson, the accounting supervisor over accounts receivable. You have agreed to help Darrell by examining the remaining five credit memo packages. You will find the last five credit memo packages at www.pearsonhighered.com/beasley. Examine these documents for Brian Thompson’s initials indicating the memos were approved (for this question, just focus on his initials for audit evidence that the control is operating effectively) and then evaluate the test results for the full sample. Provide support for your assessment on the effectiveness of the control based on testing performed.

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Answer:

a.

When using the sample size table that was given, the appropriate sample size for the control should allow for a deviation rate of four percent and the estimated population deviation rate should be 0% for 74.

b.

All five of the credit memos were authorized by Brian Thomson and that would mean that the deviation count was 0 when testing for the credit memo authorizations that had taken place. The conclusion would be and upper level deviation rate of four percent and based on the data that was given, it can be concluded that the control is effective based on the allowable deviation rate of four percent by the firm